1. Field of the Invention
This invention relates generally to risk assessment and, more particularly, to systems and methods of re-evaluating previous determinations of risk assessment in financial transactions.
2. Description of the Related Art
Most financial transactions involve a customer making a payment in exchange for goods and services from a merchant. Many times the payment is in promissory form that instructs the customer's bank to pay the merchant. A check is one example of such promissory form of payment. As is known, the funds promised by the check are sometimes not paid due to reasons such as insufficient funds in the customer's checking account, or fraud. Thus, the merchant is taking a risk whenever a check is received as payment.
Many merchants maintain local databases that include, for example, a list of check writers that have written bad checks in the past. Such databases may range from a simple list on paper for a small store owner to a computer network for a chain store. As is known in the industry, managing such databases require use of merchants resources that could otherwise be used more beneficially elsewhere. Moreover, these databases are limited in that they are generally only able to identify check writers who had previously written bad checks in the merchant's store but are generally unsuccessful in identifying check writers who have written bad checks elsewhere.
In order to manage financial transaction risk, many merchants subscribe to a check acceptance agency that assesses risk associated with financial transactions based upon previous financial transactions that customers engage in with a number of subscribing merchants. For a given transaction, a subscribed merchant sends a transaction approval request to the agency with information such as check amount, check identifying information, and information about the customer. The agency assesses the risk based upon previously accumulated data about the customer and generates a risk score based on the information received. The agency can then either approve or decline the transaction based upon the risk score. An example of these risk assessment agencies includes Telecheck.
The agency can offer a variety of risk assessment products to the merchants. These products can range from either a simple screening of the check to guaranteeing payment of the check by the agency.
Generally, the risk assessment that is being performed by the agency is done using mathematical algorithms that determine the risk based on statistical data about the customer, the transaction and the merchant without directly querying the check writer at that particular moment. Consequently, there are circumstances where the agency will decline to accept a check when circumstances are such that the risk associated with the transaction is comparatively small. For example, many check approval agencies decline checks based upon the age of the account. New accounts can be opened for fraudulent purposes hence the risk associated with accepting checks on new accounts is high. However, a customer who has recently moved to a new location may not actually pose a significant risk even though the account is new. When checks are declined, this creates problems for the merchant in that the merchant can no longer sell the good or service to the customer and can also result in the customer becoming embarrassed or upset.
In these circumstances, the customer may wish to contact the agency directly in order to protest the decline of their check. Unfortunately, present check approval agencies are often incapable of accurately determining whether the request by the customer to overturn the original decline is warranted in light of the new information in a consistent manner. Historically, agencies have not had rapid access to additional records which has resulted in the agency essentially taking the word of the customer that the decline was unwarranted. As a consequence, some agencies overturn declines primarily based upon the customer taking the step to contact the agency directly and complain about the original decline. Consequently, instances of fraud occur when customers write bad checks, are declined, and then contact the agency to complain resulting in unwarranted overturns of the decline.
A significant portion of the difficulty that the agency experiences is that the customer service representative that is answering the telephone is being forced to make a decision as to whether to overturn the original decline based primarily on the information that is being provided by the customer. If the customer is engaging in fraud or is being less than truthful, the customer may tell the customer service representative facts that cannot be verified that, if true, would lower the risk associated with the transaction. The customer service representative is thus often not able to distinguish between a legitimate circumstance for overturning an original decline and a fraudulent or risky circumstance for overturning an original decline.
Hence, there is a need for financial risk assessment agencies, such as check approval agencies, that are more capable of ascertaining whether to overturn a previous decline of a check or other service. To this end, there is a need for a risk assessment agency that is better able to query the customer during a request for an overturn and perform an updated risk assessment in order to ascertain whether to overturn the original decline.